Get Ready for the Bounce

"Don't catch a falling knife," commands the old saw. (Pardon my mixing a metaphor.) The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade. That's where Motley Fool CAPS comes in.

It's been a while, but thanks to last week's sell-off, we once again have a chance to stand beneath Mr. Market's silverware drawer in hopes of snagging a bargain. Let's meet today's contenders:

Companies selected from the list of stocks hitting new 52 week lows as reported on finviz.com. Recent price and 52-week high provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

The week in weak stock
Fear of financial Armageddon in Washington infected Wall Street last week, as across the board, stock markets cratered 4%. The sell-off hit many stocks hard, and up above you see five companies whose shares are now trading at their lowest points in a year.

Beginning at the bottom, truck manufacturer Oshkosh plunged 15% on Thursday in response to a two-thirds decline in second-quarter profitability. A day later, overnight "repo" rates on government-backed mortgage securities doubled, and panic struck the mortgage REIT industry.

Earlier in the week, it was U.S. Steel reporting poor results, and giving weak guidance. Bad news out of USX andAK Steel (NYS: AKS) put the lie to Deutsche Bank and its recent prediction of a bounce-back at both stocks on "price and demand inflection."

Fact is, about the only stock that experienced an inexplicable 52-week low last week was Harris Corp. The defense contractor is a specialist in military communications equipment, such as the tactical radio systems that it won a contract to install in MRAP armored vehicles earlier this month. The company is scraping the bottom of a three-month-long price decline. Yet, unlike every other stock on this list, Harris had no bad news whatsoever to report last week. It gets a Fool to wondering: Could this be opportunity knocking at the door?

The bull case for Harris Corp
From the numbers CAPS member carstensen is tossing around, it sure sounds like an opportunity: "EV/FCF = 10.3 ... Dividend = 2.1% at a 20.7% payout ratio." (That's low, by the way.) "Debt/Equity = 0.5," and "ROE = 25.4."

And according to PuddinHead42, Harris is "selling software programmable radios to the military like hot cakes. Will slow in the future, but for now it will out perform with a 20% run to the high 40 dollar range."

Of course, the best thing about CAPS is that with 180,000 members and counting, we're bound to have a few Fools here who actually have firsthand knowledge of the companies they're talking about. So let's hand it over to bharry05 for our final CAPS pitch on Harris: "I've seen and used Harris products in the field. With the ever increasing communications demands of today's military, Harris isn't going away any time soon. They provide essential capabilities to any mobile unit."

Essential and ... profitable? For a hint at how well Harris might do, a Fool need look no further than competitor Motorola Solutions (NYS: MSI) -- a stock I've spoken of highly in the past. Last week, this other radio maker beat Wall Street profit projections by a nearly 12% margin, earning $1.02 per share in the second quarter -- and sending the stock up to near its 52-week high.

Harris is unlikely to match that feat when it reports tomorrow evening. But with the stock trading close to its 52-week low, I do see a good chance for Harris to close the gap. I mean, as carstensen mentioned up above, the stock is really, really cheap right now. Harris costs only 8.5 times earnings, and 0.9 times sales -- that's as compared to the average defense industry stock that costs 16.7 times earnings and 1.2 times sales. With Harris currently pegged for 9% long-term earnings growth, and paying shareholders a 2.5% dividend, I think the stock's a good bet to bounce.

Time to chime in
Of course, that's just my opinion. Feel free to disagree. Click over to Motley Fool CAPS now and tell us what you think about Harris Corp.

At the time thisarticle was published Fool contributorRich Smithdoes not own shares of (nor is he short) any company named above. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 561 out of more than 180,000 members.The Motley Fool owns shares of Chimera Investment, Annaly Capital Management, and Oshkosh. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.

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